We are in the middle of the 11th Plan period — which runs from April 1, 2007 to March 31, 2012. The 11th Plan has been lauded for its clear focus on investing in infrastructure, with an emphasis on public private partnership (PPP) projects. The 11th Plan has also propagated the now famous figure of $500 billion (Rs 23,00,000 crore), which is the target for gross capital formation in infrastructure (GCFI) in the 11th Plan period. There is hardly any conference, seminar or official function where this figure is not bandied around.
The question, uppermost on everybody’s mind, is, “Where are we on this target?”
Well, as regular readers of this column know only too well, nobody in the government ever actually tells us what overall infrastructure investments are year by year. Anecdotal evidence is used to explain away the absence of hard data. Thus, senior government spokespersons will say:
“See, new airports are coming up in Delhi and Mumbai; and the ones in Hyderabad and Bangalore have been completed”, or “we are not doing that badly on power; close to 100,000 Mw is under implementation”, or “you know action has again picked up hugely in highways”, or “there is so much private interest in port development.”
We are also informed that a mid-term appraisal of the 11th Five Year Plan by the Planning Commission (expected to be completed in December) might get delayed. In a nutshell, we may not get our answer (if indeed, GCFI figures are at all forthcoming) before February or March, 2010. So, as lay infrastructure watchers outside the government, we are left to our own devices to figure out how well the country is set to achieve $500 billion in infrastructure investments in the 11th Plan.
At the inaugural session of the hugely successful Infrastructure Development Finance Company (IDFC) Conference on infrastructure on December 1 and 2, in the capital, Rajiv Lall, managing director of the IDFC, speculated that the actual investments in the 11th Plan period are likely to be of the order of around $400 billion. At the same conference, Montek Singh Ahuwalia, deputy chairman of the Planning Commission, candidly admitted that logjams at the implementation level may well lead to an under-achievement of the $500-billion target. Members of the infrastructure think-tank of one of the best-known multinational consultancy companies, admit in private that the ground reality, according to their own projections, could be closer to $280 billion.
Since “implementation” is a continuing worry, it may be instructive to note that on October 1, 2009, the UK government opened the doors of a new institution. It is called the Infrastructure Planning Commission. Enacted under the Planning Act, 2008, the Commission is replacing eight former planning systems by a single process. It is expected to cut the time taken to make decisions from up to seven years to under a year. The Commission is to act as an independent advisory body, cutting red tape for nationally significant infrastructure projects and operating as a one-stop development consent process.
For over two years now, the Confederation of Indian Industry (CII) has been stridently recommending the setting up of a National Infra Facilitation and Monitoring Agency (NIFMA) to achieve similar objectives in India. Now that the UK has done it, maybe the suggestion will get the importance it deserves.
But back to the key issue: How close, or how far is our infra-ship from the $500-billion shore?
Well, we actually have two data points supplied by the government itself which can be used to meaningfully get our arms around an indicative answer.
One, a published paper in June 2009, “The Secretariat for the Committee on Infrastructure” let it be known that in 2007-08, the GCFI was 6 per cent of GDP.
Two, in his budget speech in 2008, Finance Minister Pranab Mukherjee announced that India was likely to touch the 9-per cent GCFI figure, projected for 2012 (the terminal year of the 11th Plan) only by the end of 2014, i.e. two years behind schedule.
With this, it is not very difficult to project infrastructure investments by applying them on to GDP figures.
| Estimation of gross capital formation in infrastructure (GCFI) | |||||||
| 11th Plan Period $310 billion | 2012-13 | 2013-14 | |||||
| 2007-08 | 2008-09 | 2009-10 | 2010-11 | 2011-12 | |||
| GDP (Rs ‘000 crore) | 3,403 | 3,631 | 3,903 | 4,216 | 4,595 | 5,009 | 5,459 |
| Growth Rate (%) | 9 | 6.7 | 7.5* | 8* | 9* | 9* | 9* |
| GDP ($ billion) | 756 | 807 | 867 | 937 | 1,021 | 1,113 | 1,213 |
| GCFI (% GDP) | 6** | 6.5 | 7 | 7.5 | 8 | 8.5 | 9*** |
| GCFI ($ billion) | 45 | 52 | 61 | 70 | 82 | 95 | 109 |
| * Estimated; ** As per "The Secretariat for the Committee on Infrastructure" - June, 2009; *** As per Finance Minister's Budget Speech, 2008 | |||||||
Thus, the interplay between GDP forecasts and GCFI percentages leads us to a figure of $310 billion for the 11th Plan period.
This is a 62 per cent achievement of the 11th Plan target. It is also close to the projected 60 per cent achievement expected in new power generation capacity, i.e. about 47,000 Mw against the Plan target of 78,000 Mw.
However, there is something more worrying. It is the fact that infrastructure investments are actually going to lag behind GDP growth. Consider the table again. In the 11th Plan period, GDP in the terminal year will be 47 per cent higher than in the terminal year of the 10th Plan. At the same time, infrastructure investments at $310 billion will be up by only 40 per cent over the 10th Plan period achievement of $222 billion. This is serious, as it is well recognised that in fast-growing developing countries, infrastructure investments are expected be ahead of GDP growth — facilitating growth, rather than constraining it. That is also how the 11th Plan had viewed it.
There is a simple saying attributed to Conrad Hilton: “Achievement seems to be connected with action.”
Clearly, we need far more action on the ground, and much more inspirational leadership in infrastructure ministries and states to attempt to come close to the $500-billion target.
For starters, will somebody please tell us where we are today? And if the Planning Commission, or the finance ministry, or the ministry of programme implementation and statistics come forward and tell us that the actual figure is going to be way above $310 billion, then we would be delighted at having been proved wrong. Anybody?
The author is the chairman of Feedback Ventures. He is also the chairman of CII’s National Council on Infrastructure. Views expressed are personal
